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Primary Dealer Participation in the Secondary U.S. Treasury Market

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Abstract

The recent Joint Staff Report on October 15, 2014, exploring an episode of unprecedented volatility in the U.S. Treasury market, revealed that primary dealers no longer account for most trading volume on the interdealer brokerage (IDB) platforms. This shift is noteworthy because dealers contribute to long-term liquidity provision via their willingness to hold positions across days. However, a large share of Treasury security trading occurs elsewhere, in the dealer-to-customer (DtC) market. In this post, we show that primary dealers maintain a majority share of secondary market trading volume when DtC trading is taken into account. We also use survey data on large dealers to characterize activity in the DtC market and discuss some of the gaps in the available Treasury trading volume data.

Suggested Citation

  • Michael J. Fleming & Frank M. Keane & Ernst Schaumburg, 2016. "Primary Dealer Participation in the Secondary U.S. Treasury Market," Liberty Street Economics 20160212, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87100
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    Cited by:

    1. De Pooter, Michiel & Favara, Giovanni & Modugno, Michele & Wu, Jason, 2021. "Monetary policy uncertainty and monetary policy surprises," Journal of International Money and Finance, Elsevier, vol. 112(C).
    2. De Pooter, Michiel & Favara, Giovanni & Modugno, Michele & Wu, Jason, 2021. "Reprint: Monetary policy uncertainty and monetary policy surprises," Journal of International Money and Finance, Elsevier, vol. 114(C).
    3. Onofrio Panzarino, 2023. "Investor behavior under market stress:evidence from the Italian sovereign bond market," Temi di discussione (Economic working papers) 33, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    Treasury; Trading volume; Dealer;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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